Monday, September 16, 2013

Is an economist allowed to oppose the XL pipeline?

California is currently on the leading edge of US climate policy, as its AB 32 goals could reduce CO2 emissions by about 75 mm tons in 2020, and maybe 200 mm tons over the next 7 years, relative to business as usual. There is also a lot of excitement about the economic potential of the Monterrey shale formation yielding up to 15.4 billion barrels of oil, or about 6 billion tons of CO2. Put these together for a moment. The carbon content of the oil contained in those reserves is about 30 times the amount that will be “saved” under AB 32.
Wealthy countries and jurisdictions have focused on reducing their consumption of fossil fuels because, for the most part, they consume more than they import. It’s also easier to sell those policies as helping consumers save money. The fact that producers lose money is a lot easier to swallow if those producers live somewhere else. If we really want to be consistent though, opposing the XL pipeline means feeling very uncomfortable about binging on the Monterrey Shale. If we are capping the CO2 from the oil we are bringing into California, we need to apply the same policy to the oil that would be shipped out.